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White Paper:Bringing Telecom to Rural India

VNL, July 2008

As the developed mobile markets all over the world ap-proach saturation, the industry has begun to consider‘the next billion’ users. These are the rural populationsliving beyond the reach o traditional communicationsnetworks o any kind.Rural India is a prime example o the opportunity:

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720 million potential mobileusers await.

s the developed mobile markets all over theworld approach saturation, the industry hasbegun to consider ‘the next billion’ users. These are therural populations living beyond the reach o traditionalcommunications networks o any kind.Rural India is a prime example o the opportunity:

A huge population

•

– 720 million people in630,000 villages across 3.2 million square miles.

A massive economy

•

– over 50% o India’s total GDP. There are almost same number o middle tohigh income households in rural areas (21.16 mn)as urban India (23.22 mn).

A booming economy

•

– with the consumer durables market, or example, growing at 25% per year (vs 10% nationally).

A parallel economy

•

– with the same needs asdeveloped markets but a reduced ability to pay or them.

The rural consumer in India cannot pay the $50 permonth typical o London, Tokyo and Sydney. Nor canthey pay the $7-10 per month typical o Delhi andMumbai. But research and experience shows that theycan and will pay around $3 per month today – evenbeore the impact o communications increases theirability to pay.

The challenge is to deliver a mobile serviceto rural users that can not only be viable, butbe

proftable

at these low levels of AverageRevenue Per User (ARPU).

Currently, the mobile phone population in India isgrowing by eight million phones per month. But ruralteledensity has yet to break the 5% barrier (despitetelevision penetration levels o 26% and growing). The reason is simple:

current mobile technology can-not reach the hundreds o millions o people ready toembrace it.

THE OPPORTUNITY

“India, not China, will be the greates ontributor to the ‘next billion’ mo-bile uer, adding 294m ubriptionbetween 2007 and 2010.”

– PYRAMID RESEARCH The Next Billion: How Emerging Markets are Shaping the Mobile Industry Oct 2007

NET MOBILE ADDITIONS2007-2010: 1,4bn

03006009001,2001,500

Rest of worldUnited StatesNigeriaBrazil TurkeyPakistanIndonesiaMexicoIran61% of netadditionsIndiaChina

Source: Pyramid Research

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“You Can’t get there rom here.”

ural India has a massive pent-up demand ormobile services; a limitless supply o low-costlabour to help deploy them; and a large entrepreneurialclass ready to deliver services at the local level. Cheaphandsets are available and, unlike urban locations, spaceor Base Stations is plentiul.As powerul as these market drivers may be, the inhibi-tors are even more ormidable. The obstacles to providing protable mobile servicesto rural India (and similar rural populations all overthe world) come rom two main sources: the inherent

constraints o the market

– its geography, economy andskill levels; and the inherent

limitations o current GSM

technology, processes and models.

the Challenges o rural india

There are our main diculties in serving rural commu-nities, each one o which has appeared insurmountable:

Power challenges

•

– Most o rural India is not served by the power grid. Some areas may get ‘ag-ricultural power’ – two hours in the morning and evening – but even this is the exception.When uel can be aorded and delivered, power tends to come rom diesel generators. The com-bination o poor uel quality and poor generator maintenance severely limits the lie o any generator.

Revenue challenges

•

– Rural India can pay or mobile services, but only around $3 per month. Thecost base o any solution has to be geared to these ARPU levels.

Skills challenges

•

– There are no trained telecomengineers and ew people can read or write. Thismakes the installation and maintenance o GSMnetworks highly challenging.

Access challenges

•

– These are extremely remotecommunities, served by poor roads and no other signifcant inrastructure.

Despite these challenges, other complex services haveprotably been delivered to rural India (including cabletelevision).Unortunately, the mobile systems in use all over theworld today seem to have been designed to maximisevulnerability to these our challenges.

Today’s GSM is not ready to serve rural India.

“Te os o paive inrasrucure ienormou and teleom ompaniehould onider the inrasrucural hallenge in the rural area.”

– SANJEEV AGA, CHAIRMANCII National Committee on Telecom and Broadband

THE OBSTACLES

COMMUNICATION SPEND% of GDP, by region, 2006

01%2%3%4%5%

NorthAmericaWesternEurope

Global average: 3.2%

Asia Pacic EasternEuropeAfrica &Middle EastLatinAmerica

Source: Pyramid Research

2006 2010